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Keywords:

  • G12;
  • G14;
  • G24;
  • G34

Abstract

We provide a comprehensive examination of the post-issue wealth effects of 29 completed tracking stock restructurings. We document that for the parent stock and for the combined firm, tracking stock restructurings lead to insignificant long-term excess returns. However, we find that shareholders of tracking stocks realize significant post-issue wealth losses. Unlike spin-offs and carve-outs, announcements of tracking stock restructurings are preceded by negative one-year excess returns, and unlike the positive post-issue long-term excess returns to spin-off stocks and the insignificant long-term excess returns to carve-out stocks, tracking stocks experience negative long-term excess returns.